Ethereum shorts

Further, ether may not immediately become a deflationary currency with depreciating supply after the Merge, disappointing those positioned for that supposedly bullish effect to kick in right away. The average ether funding rate across major exchanges, including Binance, FTX, Bybit, OKEx and Deribit, drops to its most negative ever, indicating a record cost for holding short positions.

Coinalyze Coinalyze Another reason for shorts becoming too expensive is increased interest in selling perpetual futures and regular futures against long positions in the spot market. The so-called market-neutral trade, which would allow ETH holders to collect potential Ethereum fork token ETHPOW for free while bypassing the risks of any volatility in ether's price, has been quite popular among traders since early August.

Short squeeze ahead? Extreme bearish positioning, as represented by elevated fees to hold shorts, might pave the way for a short squeeze — a sudden and rapid spike due to traders unwinding their bearish bets. The funding rate is essentially the cost of leverage and becomes a burden when the market moves against expectations, forcing traders to liquidate their positions.

Should ether remain flat or bounce after the Merge, traders holding shorts may square off their bets, pushing ether higher. A number of online cryptocurrency exchanges offer margin facilities to enable that borrowing. Some exchanges lend directly using their existing stock of cryptocurrency, while others arrange peer to peer credit from other users.

For example. For more, see: What is Ethereum? Taking a Short by Going Long Elsewhere Often, ETH trades in currency pairs against other cryptocurrencies and not just national currencies such as dollars or euros. While this isn't exactly shorting, it can allow profits from a falling price in ETH.

For those seeking to profit from a falling price, various online exchanges offer short selling using margin. This compensation may impact how and where listings appear.

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How to Short Ethereum Risks Associated With Shorting ETH While long positions are simple to understand and user-friendly buying and holding an asset is a simple concept to understand , shorting introduces ideas that initially seem counter-intuitive. In most cases, short positions require trading on margin, which in itself can provide additional layers of confusion — taking out a loan to buy and then sell an asset you do not own. In addition to the learning curve, there are a number of potential risks that belie a short position.

Losing more than your deposit While the exchanges listed on this page require some form of collateral, other exchanges allow users to open margin positions on credit. This type of borrowing is appealing for many as it can open up the possibility for as much as x leverage, however it is extraordinarily risky as traders are able to lose more than they deposit.

Unlimited downside Unlike a traditional long position, where the maximum downside is reached when the price of an asset reaches zero, a short position has no limit to losses. The reason for this is that an asset can continue to appreciate indefinitely.

Fortunately with the exchanges describe above, positions are backed by collateral and will be liquidated if the price of ETH moves too far upwards. This unlimited downside can still be costly, particularly if the trader continues to add collateral to their account in order to maintain a losing position.

Price volatility It goes without saying that cryptocurrencies are enormously volatile. This volatility makes short positions extremely difficult to maintain, as a sudden appreciation in price can result in an unexpected liquidation. This can be mitigated somewhat by providing significant sums of collateral, however this only serves to increase the possible downside. Active management can be a risk in and of itself, as trading in a fast-paced, high-risk environment can lead to poor or emotionally-driven decision making.

Long-term Outlook The Ethereum protocol is in its infancy yet it has already experienced significant growth. While Ethereum continues to reach milestones, attracting new users and providing optimism for investors, the long-term outlook is certainly not plain sailing. Unlike Bitcoin, Ethereum finds itself being upgraded on a regular basis. While these upgrades help to improve things like transaction throughput and privacy, they are also capable of introducing bugs to the system.

With so many upgrades, it is possible that something catastrophic occurs, damaging investor confidence. For these reasons and more, shorting Ether with a long time horizon can be considered very risky. While it is possible that software upgrades create issues, on balance, it seems more likely that these upgrades will add — rather than subtract — enormous value.

Pending a catastrophe, Ethereum continues to serve as the leading smart-contracting protocol, with competitors stuck well behind the amount of progress being seen on Ethereum each day. Outside of academia, Julius is a CFO consultant and financial business partner for companies that need strategic and senior-level advisory services that help grow their companies and become more profitable. At the same time, rival digital currency Bitcoin BTC has gained 6.

Some are guessing that a series of flaws and setbacks in the Ethereum code and security breaches are finally undermining its value and see its price falling further. For those looking to profit from falling ETH prices, here is how to short it. See also: Bitcoin Vs Ethereum: Driven by Different Purposes Shorting using Margin on Exchanges For people who want to profit from a falling price, short selling is an option where you borrow some ETH that you don't already own from somebody who does, then sell it in the market, hoping to buy it back at a lower price.

A number of online cryptocurrency exchanges offer margin facilities to enable that borrowing. Some exchanges lend directly using their existing stock of cryptocurrency, while others arrange peer to peer credit from other users. For example.

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